Just Like India, Indonesia Rallies On Election Fever Too

By Shuli Ren

Remember the political optimism in 2008 when Barack Obama was running for the U.S. president? I miss that.

Indonesia is catching some of that enthusiasm today. The popular Jakarta Governor, Joko Widodo, said he would run for the presidency of Indonesia in July, sending the JSX Index 3.2% higher. The iShares MSCI Indonesia ETF (EIDO) opened 7% higher this morning.

This is an election year for all of the Fragile Five – Brazil, India, Indonesia, South Africa, and Turkey. India and Indonesia seem to be the only two markets that may propel in reform-minded politicians. The uninspiring incumbents are expected to win in the other three.

And the performance of the equity markets have diverged based partly on that. As India readies itself for a general election starting April, the SENSEX has already rallied over 6% since February, on the expectation that the business-friendly Narendra Modi, the prime minister candidate of the main opposition Bharatiya Janata Party, would win the general election. The Wisdomtree Trust India Earnings Fund (EPI) has advanced 10.3% and the iShares MSCI India Index Fund rose 7.9%. Indonesia’s equity market is likely to rally further if Mr. Widodo looks poised to win.

In many ways, India and Indonesia are not unalike. Both held up pretty well this year. Thanks to earlier and firm central bank tightening, both countries’ current account deficits narrowed quickly and their currencies were not subject to this January‘s sell-offs. Year-to-date, the Indian rupee gained 1.2% and the Indonesian rupiah rallied 6.7%. Both markets are favored by foreign investors again this year.

About Emerging Markets Daily

Emerging markets have been synonymous with growth, but the outlook for individual nations is constantly changing. Countries from Brazil and Russia to Turkey face challenges including infrastructure bottlenecks, credit issues and political shifts. The Barrons.com Emerging Markets Daily blog analyzes news, data and research out of emerging markets beyond Asia to help readers navigate the investment landscape.

Barron’s veteran Dimitra DeFotis has been blogging about emerging market investing since traveling to India and Turkey. Based in New York, she previously wrote for Barron’s about U.S. equity investing, including cover stories and roundtables on energy themes. Dimitra was among the first digital journalists at the Chicago Tribune and started her career as a police reporter at the Daily Herald in the Chicago suburbs. Dimitra holds degrees from the University of Illinois and Columbia University, where she was a Knight-Bagehot Fellow in the business and journalism schools.